NI CHANGES – WHAT THEY MEAN FOR YOU AND YOUR BUSINESS

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Here’s a closer look at what the Autumn Statement changes to National Insurance will mean for individuals and for businesses.

As well as income tax, all employees earning more than £12,570 a year pay Class 1 NICs. The main rate of Class 1 NICs will be cut from 12 per cent to 10 per cent from January 6, 2024.

It will mean that over a full year, the average worker on £35,400 will receive a NIC reduction of more than £450. Workers earning more than £50,270 a year will receive a NIC reduction of £754.

The Class 1 NIC rate will remain at two per cent for earnings above £50,270 a year.

There are also no changes to the rate of employer’s Class 1 NICs, which remains at 13.8 per cent.

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4.

Class 2 NICs have been at a flat rate sum of £179.40 a year (£3.45 a week) in 2023/24 but no one will be required to pay the charge from April 6, 2024.

And on top of that the main rate of Class 4 NICs will be cut from nine per cent to eight per cent from the same date in April. Class 4 NICs will continue to be calculated at two per cent on profits over £50,270.

The government says that taken together these changes will result in an average self-employed person with profits of £28,200 saving £336 in 2024/25.

Class 2 NICs currently provide the self-employed with access to a range of state benefits, including the state pension.

From April 6, 2024, self-employed people with annual profits above £12,570 – will continue to receive access to the benefits.

Those with profits between £6,725 and £12,570 will continue to receive access to the benefits, via a National Insurance credit.

And if your profit is under £6,752 or you are making a loss, you will be able to continue to pay Class 2 NICs on a voluntary basis in order to maintain access to state benefits.

Class 2 NICs had been due to increase in 2024/25 but it seems that these will be maintained at the current £3.45 weekly level for those in this bracket.

• To discuss any issues raised in this article or any tax matters please contact me on 01772 430000